The Mortgage Interest Deduction and its Impact on Homeownership Decisions

Christian Hilber and Tracy M. Turner
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Tracy M. Turner: Kansas State University

The Review of Economics and Statistics, 2014, vol. 96, issue 4, 618-637

Abstract: This paper examines the impact of the combined U.S. state and federal mortgage interest deduction (MID) on homeownership attainment, using data from 1984 to 2007 and exploiting variation in the subsidy arising from changes in the MID within and across states over time. We test whether capitalization of the MID into house prices offsets the positive effect on homeownership. We find that the MID boosts homeownership attainment only of higher-income households in less tightly regulated housing markets. In more restrictive places, an adverse effect exists. The MID is an ineffective policy to promote homeownership and improve social welfare. © 2014 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Keywords: mortgage interest deduction; homeownership; MID; housing market; social welfare (search for similar items in EconPapers)
JEL-codes: H70 R20 R32 R38 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (87)

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Related works:
Working Paper: The mortgage interest deduction and its impact on homeownership decisions (2014)
Working Paper: The Mortgage Interest Deduction and its Impact on Homeownership Decisions (2010)
Working Paper: The mortgage interest deduction and its impact on homeownership decisions (2010)
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